Issuu

Test bank project for Forensic Accounting and Fraud Examination (2nd Ed.) by Mary-Jo Kranacher and Dick Riley Test bank written by Brian L. Carpenter, PhD, CFE ∙ (989) 205-4182 ∙ Brian@BrianLCarpenter.com

CHAPTER 1 Module 1 1.

Which of the following is NOT one of the four essential elements of fraud under common law? A. B. C. D.

The “felonious stealing, taking and carrying, leading, riding, or driving away with another’s property, with the intent to convert it or deprive the owner thereof” is the legal definition of: A. B. C. D.

Swears an oath before taking office Acts for the benefit of another Betrays the trust of another Controls access to an organization’s cash or assets

An unauthorized assumption and exercise of the right of ownership over goods or personal chattels belonging to another, to the alteration of their condition or the exclusion of the owner’s rights is the definition of: A. B. C. D.

Embezzlement Tort Larceny Fraud

A fiduciary is someone who: A. B. C. D.

A material false statement Reliance on the false statement by the victim Knowledge that the statement was false when it was spoken Use of email, wire, or telephone with a criminal intent to deceive

Collusion Concealment Capital misappropriation Conversion

The intentional, deliberate misstatement, or omission of material facts or accounting data that is misleading and, when considered with all the information made available, that would cause the reader to change or alter his or her judgment or decision is defined by the Association of Certified Fraud Examiners as: A. B. C. D.

Financial statement fraud Financial statement misstatement Financial statement concealment Financial statement re-statement

1 of 11

Which of the following is an example of financial statement and reporting fraud? A. B. C. D.

The essential characteristics of financial statement fraud are: A. B. C. D.

B. C. D.

Assessment of internal controls, preservation of evidence, whistleblower protection and increased penalties for securities fraud Mandatory separation of duties, two-factor authentication for online transactions, and prohibition of fraudulent financial reporting Mandatory quarterly reporting of shell company beneficial ownership, mandatory criminal background checks on all publicly traded company officers and directors, and annual review of internal controls by the SEC Auditing firm competence certification, annual disclosure of conflicts of interest by the board of directors, prohibition of illegal gratuities and penalties for whistleblowers

The occupational fraud and abuse classification system (fraud tree) arranges organizational frauds in which three categories? A. B. C. D.

10.

The misstatement is material and intentional and the users of the financial statements are investors in publicly traded companies. This misstatement is material and intentional and the preparers of the financial statements have a fiduciary obligation to the organization. The misstatement is material and intentional and the preparers of the financial statements fail to report the misstatement to the SEC or other applicable authority. The misstatement is material and intentional and the users of the financial statements have been misled.

As a result of the Sarbanes-Oxley Act (2002), which of the following became part of the business landscape? A.

Failing to post audit results on the company’s website Debt ratio is materially higher than industry standards Improper timing of revenue and expense recognition Net income for any quarterly filing is 17% or more below analyst predictions

The act, concealment, and conversion Existence of a fiduciary relationship, breach of duty, harm to the plaintiff or benefit to the fiduciary Asset misappropriation, corruption, and financial statement fraud Incentive, opportunity, and rationalization.

Internal fraud committed by one or more employees of an organization is more commonly referred to as: A. B.

Fiduciary breach and embezzlement Insider trading and market timing

2 of 11

C. D. 11.

The approach to investigating fraud recommended by the text: A. B. C. D.

12.

Identify the specific law that was violated Examine relevant evidence with an eye toward demonstrating three attributes of fraud Defer decisions that are suited to an attorney’s expertise Provide reasonable evidence in support of any opinion of guilt

The three attributes of a fraud are: A. B. C. D.

13.

Occupational fraud and abuse Check tampering and billing schemes

The scheme or fraud act, the concealment activity, and the conversion or benefit. The motive, rationalization and opportunity. The intent, the planning, and the execution of a fraudulent act. Asset misappropriations, corruption, and financial statement fraud and other fraudulent statements.

Who said, “White collar criminals consider your humanity as a weakness to be exploited …”? A. B. C. D.

Dr. Joseph T. Wells Sherron Watkins Sam E. Antar Andrew Fastow

Module 2 14.

Forensic accounting is the application of financial principles and theories to facts or hypotheses in a legal dispute and consists of two primary functions: A. B. C. D.

15.

Litigation advisory services and investigative services Expressing an opinion of guilt or innocence in court regarding audit results and documenting the steps taken to reach that opinion Subjecting accounting data to a Benford Analysis and explaining the results to a judge or jury Providing courtroom testimony and administrative technical guidance to attorneys

Forensic and Valuation Services (FVS) professionals can expect that: A. B. C.

Their opinion will be carefully noted in court. The attorney for opposing counsel to defer to the FVS professional’s expert opinion on matters pertaining to forensic accounting. Their work will be carefully scrutinized by the opposing side and that engagements are adversarial in nature.

3 of 11

D. 16.

Mediation, arbitration, and negotiations are directed by FVS professionals.

Which of the following is NOT typical of forensic and litigation advisory services? A. B. C. D.

Cost and lost profits associated with construction delays. Divorce and matrimonial issues. Environmental issues. Stating an expert opinion about the guilt or innocence of a plaintiff or defendant in a court of law.

Module 3 17.

Forensic accounting and fraud examination require at least three major skill types: A. B. C. D.

Inquisitive, persuasive, and authoritative Equanimity, objectivity, and a commitment to excellence Technical competence, investigative, and communication Specialization in law or accounting, experience, and ongoing professional development

Module 4 18.

Under current auditing standards, the auditor is required to: A. B. C. D.

19.

The interrelationship among auditing, fraud examination, and forensic accounting is dynamic and changes over time because of: A. B. C. D.

20.

Undertake a fraud-risk assessment but not for planning and performing auditing procedures to detect immaterial misstatements. Undertake a fraud-risk assessment to include planning and performing auditing procedures to detect immaterial misstatements. Undertake a fraud-risk assessment but not for planning and performing auditing procedures to detect immaterial misstatements unless such misstatements are caused by fraud (rather than error). Undertake a fraud-risk assessment to include planning and performing auditing procedures to detect immaterial misstatements whether caused by fraud or error.

the Internet and other technological advances high profile fraud cases such as Enron, Tyco, and WorldCom emerging research by the ACFE which casts doubts on previously existing theories of criminality political, social, and cultural pressures.

Fraud examination is the ________ of resolving allegations of fraud from tips, complaints, or accounting clues.

4 of 11

A. B. C. D.

Tradecraft Art and science Discipline Accounting technique

Module 5 21.

If a company generates $12,000,000 in annual sales and has an operating margin of 5%, how many additional dollars in sales would it need to generate to make up for fraud losses of $180,000? A. B. C. D.

22.

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, median fraud losses are the highest in cases of: A. B. C. D.

23.

Billing Check tampering Expense reimbursements Skimming

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, what is the median loss for schemes that ran 19-24 months in duration? A. B. C. D.

25.

Asset misappropriation Corruption Financial reporting fraud Insider trading

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, what kind of fraud scheme resulted in the greatest percentage of cases? A. B. C. D.

24.

$3,600,000 $360,000 $180,000 $1,800,000

$178,000 $100,000 $150,000 $45,000

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, what percentage of asset misappropriation cases involved the creation of fraudulent physical documents? A. B.

60.7% 49.3%

5 of 11

C. D. 26.

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, _______ remain the most frequent means by which occupational fraud is detected. A. B. C. D.

27.

Male; female Female; male Hourly; salaried Salaried; hourly

When it comes to fraud loss amounts in organizations, the data shows that there is a direct correlation between ________ loss and ________. A. B. C. D.

30.

Customers Vendors Shareholders Employees

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, ________ employees caused median losses that were more than twice as large as those of __________ employees. A. B. C. D.

29.

Internal audits Management reviews Tips Account reconciliations

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, the largest source of tips that fraud is occurring comes from: A. B. C. D.

28.

52.9% 42.2%

Average; perpetrator’s intelligence Average; perpetrator’s position Median; perpetrator’s intelligence Median; perpetrator’s position

Although most cases in the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse involved a single perpetrator, when two or more persons conspired, the median loss was more than ____ times higher. A. B. C. D.

Two Seven Nine Four

6 of 11

31.

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, survey respondents were presented with a list of 17 common behavioral red flags associated with occupational fraud and asked to identify which, if any, of these warning signs had been displayed by the perpetrator before the fraud was detected. Rank the presence of the following four red flags in order of their prevalence from highest to lowest percentage of cases in which they were identified. A. B. C. D.

32.

According to the ACFE’s 2016 Report to the Nations on Occupational Fraud and Abuse, what percent of cases were perpetrated in companies with fewer than 100 employees? A. B. C. D.

33.

72.8% 12.8% 30.1% 49.7%

Antifraud professionals logically conclude that small organizations are particularly vulnerable to occupational fraud and abuse. The results from fraud surveys bear this out: losses in the smallest companies were comparable to or greater than those in organizations with the largest number of employees. It is suspected that this phenomenon exists for two reasons. A. B. C. D.

34.

Living beyond means, financial difficulties, past-employment related problems, excessive pressure from within organization Living beyond means, financial difficulties, wheeler-dealer attitude, unusually close association with vendor/customer Living beyond means, financial difficulties, addiction problems, divorce/family problems Living beyond means, financial difficulties, social isolation, complained about inadequate pay

Smaller businesses have fewer divisions of responsibility and there is a greater degree of trust where people know one another personally. Smaller businesses employ fewer highly trained business managers and employees are less supervised. Smaller businesses are more mission driven by nature and less inclined to formally orient new employees to their responsibilities. Smaller businesses employ more people with a wheeler-dealer mindset and don’t solicit competitive bids as frequently.

Which three antifraud measures are associated with the largest reduction in median losses (though not among the most commonly implemented antifraud controls)? A. B. C.

Proactive data monitoring/analysis, management review, surprise audits Proactive data monitoring/analysis, management review, fraud training for employees Proactive data monitoring/analysis, management review, hotline

7 of 11

D. 35.

29.3% of respondents to the 2016 ACFE survey cited a lack of ________ as the victim organizations’ primary issue that contributed to the fraudster’s ability to perpetrate the scheme. A. B. C. D.

36.

B. C. D.

Fail to understand the many ways in which fraud and other white-collar fraud can be perpetrated Do not keep pace with the growing sophistication of fraud and other white-collar offenses Do not do enough to punish fraud and other white-collar offenses Are overwhelmed with other concerns to the extent that fraud and other whitecollar offenses are regarded as inconsequential in the grand scheme of things.

Regarding criminal prosecutions of occupational fraud and their outcomes, although the percentage of cases referred to prosecution ____________ gradually from the ACFE’s 2012 to the 2016 reports, the percentage of cases that prosecutors successfully pursued ___________. A. B. C. D.

38.

Management review Amoral corporate culture Employee fraud education Internal controls

A common complaint among those who investigate fraud is that organizations and law enforcement ___________________________________________. A.

37.

Proactive data monitoring/analysis, management review, code of conduct

Decreased; increased Increased; decreased Decreased; decreased Increased; increased

One goal of the ACFE survey was to try to determine why organizations frequently decline to take legal action against fraudsters. In cases where no legal action was taken, the survey provided respondents with a list of commonly cited explanations and asked them to mark any that applied to their case. Which of the following was NOT one of the explanations cited by the survey’s participants? A. B. C. D.

Fear of bad publicity Internal discipline sufficient Lack of evidence Credibility compromise

Module 6

8 of 11

39.

Given that occupational fraudsters do not have distinguishing outward characteristics to identify them as such, the most effective way to catch a fraudster is to: A. B. C. D.

40.

Professional skepticism can be broken into three attributes. Which one of the following is NOT one of those three attributes? A. B. C. D.

41.

B. C. D.

Take disparate pieces of financial and non-financial data to tell a story of who, what, when, where, how, and why Base investigative conclusions on logic and arguments that the defendant is a “bad person” Connect the dots in a case consistent with the investigator’s interpretation of the evidence Excessively rely on evidence, especially when the plaintiff has a clear track record of ethical conduct or is an upstanding community leader

To prove fraud, the investigator has to deal with the issue of: A. B. C. D.

44.

Evaluate any personal biases that cause you to suspect fraud Assume that it probably indicates dishonest conduct by someone in the organization Pull on it and see what happens Recognize that its mere existence is very likely proof of fraud

One of the best ways to ruin an investigation, fail to gain a conviction, or lose a civil case, is to: A.

43.

A commitment to persuasive evidence A willingness to give others a presumption of goodwill until they prove otherwise A questioning mind and a critical assessment of the evidence A recognition that the plaintiff and/or the defendant may be masking the true underlying story

During the course of an investigation, you will encounter “loose threads” or “red flags” such as accounting anomalies. When encountering such anomalies, the fraud professional should: A. B. C. D.

42.

Set aside professional skepticism Rely on your own value system Think like one Accept evidence without being critical of it

Professional skepticism Prior bad acts Intent Specific laws that were broken

The triangle of fraud action is composed of which three elements:

9 of 11

A. B. C. D. 45.

In most occupational fraud cases, it is ___________ that there will be direct evidence of the crime. A. B. C. D.

46.

Create hypotheses Draw conclusions Gather related data/evidence Identify a specific law or laws that may have been broken

When using a hypotheses-evidence matrix to evaluate evidence in support of any particular hypothesis in a fraud case, it is crucial to understand that: A. B. C. D.

49.

Not ethical Not lawful Not unusual Not in conformity with ACFE investigative standards

Using the fraud theory approach to investigate a case, which step should be your first in an investigation? A. B. C. D.

48.

Likely Unlikely Certain Impossible

You are a fraud examiner or forensic accountant that is about to conclude an investigation. You have gathered evidence that will allow you to compellingly connect the who, what, when, where, and why dots in court. You are also reasonably certain there is additional evidence that will support your conclusions, but you have been unable to find any. In the world of fraud investigations, moving forward without such evidence is: A. B. C. D.

47.

Incentive, opportunity, rationalization Surveillance, invigilation, documentation Devise a scheme, execute it, launder the proceeds Act, concealment, conversion

We can never prove any hypothesis We can never disprove intent We shouldn’t become distracted by the “direction” of evidence We shouldn’t become distracted by evidence that seems to eliminate alternative hypotheses

There are essentially three tools available to fraud examiners, regardless of the nature of the fraud examination or forensic accounting investigation. Which of the following is NOT one of these three tools?

10 of 11

A. B. C. D. 50.

Using non-financial data to corroborate financial information is: A. B. C. D.

51.

Skill in examining financial statement, books and records, and supporting documents Interviewing skills Preserving a crime scene from contamination Observation (behavior, displays of wealth, specific offenses)

Powerful and its value cannot be overstated Amateurish and used primarily by inexperienced investigators Dangerous because it is usually misunderstood by juries Acceptable on an extremely limited basis

Link charts, flow charts, commodity and money flow diagrams, timelines are: A. B. C. D.

Popular in the movies, but rarely used in the real world of fraud investigation Useful during the hypothesis stage of an investigation but generally not beyond it Important as both investigative tools and communication tools Generally make complicated material less understandable because they leave too much room for speculation and interpretation compared to actual data

Module 7 52.

_______________ is the totality of circumstances that lead a reasonable, professionally trained, and prudent individual to believe that a fraud has occurred, is occurring, and/or will occur. All fraud examinations must be based on it. A. B. C. D.

Postulation Predication Proposition Premise

11 of 11

CHAPTER 2 Module 1 1.

A number of theories about why the vast majority of people do not commit crime have been set forth over time. Which of the following is NOT one of the reasons cited in the text? A. B. C. D.

The term occupational fraud and abuse is defined as: A. B. C. D.

The use of one’s occupation for status enrichment through misuse or misapplication of the employing organization’s resources or assets. The use of one’s occupation for personal enrichment through the unintentional misuse or misapplication of the employing organization’s resources or assets. The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of a different organization’s resources or assets. The use of one’s occupation for personal enrichment through the deliberate misuse or misapplication of the employing organization’s resources or assets.

Four common elements to occupational fraud and abuse schemes were first identified by ACFE in its 1996 Report to the Nation on Occupational Fraud and Abuse. Which of the following does not contain all four elements? A.

B. C. D.

Social conditioning/parental upbringing Fear of punishment To act in a just and moral manner according to society’s standards Desire for rewards

The activity is clandestine, violates the employee’s fiduciary duties to the organization, is committed for the purpose of direct or indirect financial benefit to the employee, may or may not result in costs to the employing organization’s assets, revenues, or reserves. The activity is clandestine, violates the employee’s fiduciary duties to the organization, is committed for the purpose of direct or indirect financial benefit to the employee, and is a violation of state and/or federal law(s). The activity is clandestine, violates the employee’s fiduciary duties to the organization, is committed for the purpose of direct or indirect financial benefit to the employee, and costs the employing organization assets, revenues, or reserves. The activity is clandestine, violates the employee’s non-fiduciary duties to the organization, is committed for the purpose of direct or indirect financial benefit to the employee, and costs the employing organization assets, revenues, or reserves.

The term white-collar crime was coined by _____________ in 1939, when he provided the following definition: crime in the upper, white-collar class, which is composed of respectable or at least respected, business and professional men. A. B.

Steve Albrecht Edwin H. Sutherland 1 of 7

C. D. 5.

Organizational crime occurs when companies, corporations, not-for-profits, government bodies, and otherwise legitimate and law-abiding organizations are: A. B. C. D.

The RICO Act was adopted Forensic litigation advisory services are offered by forensic accountants The Sarbanes-Oxley Act was adopted SAS99 was adopted

Money laundering, mail and wire fraud, criminal conspiracy and racketeering are examples of crimes associated with: A. B. C. D.

Ordinary corporate behavior Occupational fraud and abuse Organizational crime More of a problem nationally than internationally

Civil litigation issues such as damage claims, lost wages, disability, wrongful death, assets and business valuations, costs and lost profits associated with construction delays or business interruptions, insurance claims, intellectual property infringement, environmental issues, tax claims are examples of the kinds of issues for which: A. B. C. D.

involved in unethical conduct involved in organized crime involved in a civil offense involved in a criminal offense

Unfair pricing, unfair business practices, violation of the FCPA and tax evasion are examples of: A. B. C. D.

Joseph T. Wells Donald R. Cressey

The fraud triangle A private or civil wrong or injury, other than breach of contract, for which the law will provide a remedy in the form of an action for damages Organized crime Occupational fraud and abuse

Black’s Law Dictionary defines a tort as: E. F. G. H.

A private or civil wrong or injury, other than breach of contract, for which the law will provide a remedy in the form of an action for damages An unlawful conduct of business affairs with funds derived from illegal acts When two or more people intend to commit an illegal act and take some steps toward its implementation Non-compliance with agency, regulatory, and court requirements

2 of 7

10.

The legal standard for the tort of negligence does NOT include the following element: A. B. C. D.

11.

Damages Duty Cause in Fact Intent

A critical aspect of civil litigation for the forensic accountant and fraud examiner is the understanding that: E. F. G. H.

Both sides (plaintiff and defendant) are expected to tell their story Both sides (plaintiff and defendant) are expected to present only facts in court Both sides (plaintiff and defendant) are expected to countersue each other as a strategy Both sides (plaintiff and defendant) are expected to negotiate a settlement

Module 2 12.

In the fraud perpetrator profile presented in the text, which set of characteristics summarizes the typical fraud perpetrator? A. B. C. D.

13.

One of the interesting aspects of the characteristics of fraud perpetrators is that they do not typically have ______________. A. B. C. D.

14.

Male, middle-aged to retired, with the company for five or more years, never charged or convicted of a criminal offense, well educated, accountant, upper management, or executive, generally acts in collusion with others Male, middle-aged to retired, with the company for five or more years, previously charged or convicted of a criminal offense, well educated, accountant, upper management, or executive, acts in alone Male, middle-aged to retired, with the company for five or more years, never charged or convicted of a criminal offense, well educated, line employee or lower management, or executive, acts in collusion with others Male, middle-aged to retired, with the company for five or more years, never charged or convicted of a criminal offense, well education, accountant, upper management, or executive, acts alone

Respect within their community Much knowledge of accounting standards A criminal background A college degree

Edwin H. Sutherland (1883-1850), a criminologist, coined the term white-collar crime in 1939 and later developed the theory of _____________________ whose basic tenet is that crime is learned. A.

Constructivist association 3 of 7

B. C. D. 15.

Donald R. Cressey (1919-1987) used his doctoral dissertation to study embezzlers, whom he called “trust violators.” Upon completion of his research, he developed what still remains as the classical model for the occupational offender. In 1991, Dr. Steve Albrecht organized Cressey’s three conditions into a tool that has become known as the “fraud triangle.” Which answer below constitutes the three legs of the fraud triangle? A. B. C. D.

16.

General information Accounting know-how Observed gaps in internal controls Knowledge of financial fraud schemes

Fraud deterrence begins _______________. A. B. C. D.

19.

Financial greed Problems resulting from personal failure Depression or other mental health issues Amoral value system

In Cressey’s view, there were two components of perceived opportunity necessary to commit a trust violation: ____________________ and technical skill. E. F. G. H.

18.

Perceived opportunity, perceived motive, and intellectualization Perceived pressure, perceived isolation, and rationalization Perceived motive, perceived opportunity, and minimization Perceived pressure, perceived opportunity, and rationalization

Cressey identified six categories of non-shareable financial pressures that prompted embezzlers to act. These included violation of ascribed obligations, business reversals, physical isolation, status gaining, employer-employee relationships, and ______________. A. B. C. D.

17.

Fraud triangle association Attributional association Differential association

In the existence of sound internal controls In the organizational mission and values In the employee’s mind In the beliefs of the culture at large

When considering antifraud measures within an organization, the axiom that “fraud deterrence begins in the employee’s mind” most closely means that there has to be a _________________. E. F. G.

Perception of detection Perception of punishment (if caught) Perception of fairness within all levels of the organization 4 of 7

H. 20.

Findings in the ACFE’s 2016 Report to the Nations suggest that organizations that lacked _______________ were more susceptible to asset misappropriation schemes. A. B. C. D.

21.

After Before While Seldom

One of the most fundamental observations of the Cressey study was the _____________, i.e., that the conditions under which a trust violation occurs necessitate all three elements (of what was later named the fraud triangle). E. F. G. H.

23.

Employee perception of detection A proper tone at the top Internal controls A reporting mechanism

Cressey observed that rationalization as it applies to occupational fraud occurs _________________ the crime. A. B. C. D.

22.

Perception of shared values within the organization

Conjuncture of events Timing of events Circumstances of events Sequence of events

Findings in the ACFE’s 2016 Report to the Nations indicate that at least one warning sign had been displayed by the perpetrator before the fraud was detected in more than 91% of cases. In 57% of cases, two or more such red flags were seen. According to the study, the six most commonly observed behavioral red flags were: living beyond means, financial difficulties, unusually close association with a vendor or customer, a “wheeler-dealer” attitude, recent divorce or family problems, and ______________. I. J. K. L.

Control issues or unwillingness to share duties Addiction problems Irritability, suspiciousness, or defensiveness Excessive pressure from within the organization

Module 3 24.

While Dr. Steve Albrecht’s research findings on fraud perpetrator characteristics were very similar to the non-shareable problems and rationalizations identified by Cressey, Albrecht introduced the ____________________ into the actions of the fraudsters. A.

The role of compensation

5 of 7

B. C. D. 25.

Dr. Steve Albrecht substituted _______________ for rationalization in the development of the “Fraud Scale.” A. B. C. D.

26.

Age Myers-Briggs Personality Types Arrogance (or lack of conscience) Garden variety greed

Crowe expanded the fraud triangle into a pentagon by adding ______________ and ___________. A. B. C. D.

29.

Internal control environment Myers-Briggs Personality Types The role of arrogance Individual capability

In 2010, Jonathan Marks argued for the role of _____________ in fraud. A. B. C. D.

28.

Emotional distress Greed Personal integrity Sociopathic tendencies

In a 2004 CPA Journal article, Wolfe and Hermanson argue that the fraud triangle could be enhanced to improve both fraud prevention and detection by considering a fourth element, ________________. A. B. C. D.

27.

The role of the organization The role of social isolation The role of (an unfair) performance evaluation system

Compensation equity and cultural norms Arrogance and competence Myers-Briggs Personality Types and educational attainment Internal control environment and organizational pressure

Significant research suggests that increasing _______________ may be the best way to deter employee theft. A. B. C. D.

The threat of punishment by the employer The presence of internal security The perception of detection The frequency of fraud prevention education

Module 4

6 of 7

30.

In addition to the fraud triangle, typical motivations of fraud perpetrators may be identified with the acronym M.I.C.E. This stands for money, ideology, _________, and ego/entitlement. E. F. G. H.

31.

Coercion Conversion Collusion Concealment

According to the AICPA, the “Achilles Heel” of an organization’s antifraud efforts is _______________ and ___________________. A. B. C. D.

An amoral corporate culture; an arrogant CEO Missing internal controls; lack of management review Collusion; management override A weak board of directors; an arrogant CEO

Module 5 32.

In contrast to the fraud triangle which US courts have deemed to be more of a theoretical concept rather than a set of measurable standards or a specific, practical methodology for arguing that fraud occurred, the triangle of fraud action can be used in developing prosecutorial evidence. In particular, the element of ________________ provides a compelling argument that the act was intentional. A. B. C. D.

33.

The Act Conversion Opportunity Concealment

The triangle of fraud action is sometimes referred to as _______________. A. B. C. D.

The fraud triangle The elements of fraud The fraud diamond Crowe’s Fraud Pentagon™

7 of 7

CHAPTER 3 Module 1 1.

(75) One reality of what is known as the criminal justice funnel is: A. B. C. D.

Few cases result in convictions and incarcerations A majority of cases result in convictions and incarcerations Regulatory agencies play an important role in monitoring illegal activities Civil and criminal cases cannot be pursued simultaneously

Module 2 2.

(76) Individual rights are grounded in four amendments to the US Constitution associated with due process. Which of the following is not one of these four amendments? A. B. C. D.

(76) Regarding interviews conducted by a nonpublic entity and the Sixth Amendment, an employee: A. B. C. D.

Does not have a right to consult a lawyer prior to an interview but has a right to have one present during one Does not have a right to have a lawyer present during an interview but has a right to consult one prior Does not have a right to have a lawyer present or to consult one prior to the interview Has a right to have a lawyer present during an interview and to consult one prior

(76) In order for a confession to be valid, it must be deemed to be: E. F. G. H.

The Fourth Amendment prohibits unreasonable searches and seizures The Seventh Amendment which entitles the accused the right to a speedy trial The Fourteenth Amendment entitles a person to due process of law and equal protections under the law The Fifth Amendment provides that a person cannot be compelled to provide incriminating information against himself in a criminal case

Voluntary Coerced Factual Sincere

(77) The overriding rule regarding searches and search warrants is that individuals have: A. B. C.

A right to not self-incriminate An expectation of absolute privacy within their home or vehicle A reasonable expectation of privacy

1 of 7

D. 6.

(77) A workplace search is considered reasonable under two circumstances: The search must be justified at its inception because it is likely to reveal evidence of work-related misconduct, and: E. F. G. H.

B. C. D.

Any information derived from confidential informants cannot be introduced if the CI has a felony record. Any information from evidence that was in “plain view” of law enforcement cannot be introduced. Any information derived from voluntary consent to search cannot be introduced. Any information derived from illegal evidence cannot be introduced.

(78) Surveillance is generally legal, however, once the investigator enters the realm of electronic (audio) surveillance, the laws become more complicated. Generally federal law prevents ________________________: A. B. C. D.

The search is necessary to further the investigation. The search is necessary to satisfy a court order. The search is necessary to preserve public order. The search is necessary to operational efficiency.

(77) In the contexts of searches, the expression “fruit from the forbidden tree” means: A.

A right to privacy in the workplace (such as lockers, desks, etc.)

The interception and/or recording of wire, oral, or electronic communications except if it is collected by a certified fraud examiner (CFE) as part of a legitimate investigation. The interception and/or recording of wire, oral, or electronic communications except if it is recorded in a public venue. The interception and/or recording of wire, oral, or electronic communications except by law enforcement officers with a warrant. The interception and/or recording of wire, oral, or electronic communications except if it is evidence of a class B or higher felony investigation.

(79) The Daubert standard is related to the admissibility of expert testimony (expert opinions). Under the Daubert standard, the trial judge makes an assessment of whether an expert’s scientific testimony is based on reasoning or methodology that is scientifically valid and can properly be applied to the facts at issue. Which of the following is NOT one of the considerations in determining whether the methodology is valid? A. B. C. D.

Whether the theory or technique in question can be used and has been tested. Whether the theory or technique in question has been verified through a doubleblind study that includes a control group. Whether the theory or technique has been subject to peer review and publication. Whether the theory or technique has attracted widespread acceptance within a relevant scientific community.

2 of 7

Module 3 10.

(80) While grand juries have great leeway related to issuing subpoenas, the Fourth Amendment requires reasonableness. To meet the reasonableness standard, the subpoena must be likely to generate evidence that is: E. F. G. H.

11.

Relevant to the issue under consideration, be particular and reasonably specific, and be limited to a reasonable time frame. Relevant to the issue under consideration, be particular and reasonably specific, and be limited to class B felony (or higher) investigations. Relevant to the issue under consideration, be particular and reasonably specific, and be based on a higher than average probability that a crime has been committed. Relevant to the issue under consideration, be particular and reasonably specific, and must meet the Daubert standard.

(81) A search warrant has several advantages over a subpoena. Which of the following is NOT one of the advantages described in the text? A. B. C. D.

A warrant allows the holder of the warrant, not the target of the defense counsel, to decide which documents are relevant and must be produced. A warrant avoids, but does not eliminate, the possibility of the destruction of evidence. A warrant gives the investigator the ability to interview key witnesses while the search is being conducted. A warrant gives the investigator the ability to seize any unlawful item that may be discovered in the search if it is part of a class B (or higher) felony.

Module 4 12.

13.

(81) Generally, evidence is admissible in court if it is relevant, its probative value outweighs any prejudicial effects, and: A. It is trustworthy, meaning that it is presented by credible witnesses. B. It is trustworthy, meaning that it is subject to examination and cross-examination. C. It is trustworthy, meaning that it is fact based rather than opinion. D. It is trustworthy, meaning that it is neutral in its impact on the jury. (82) Even relevant evidence may be excluded from judicial proceedings if it is prejudicial, confusing, or ____________. A. B. C. D.

Contradictory Material Misleading Inconclusive

3 of 7

14.

(82) Prior to admissibility of evidence in court, the attorney must lay the foundation demonstrating relevance, materiality, and ____________ (reliability). A. B. C. D.

15.

(82) You are testifying in a criminal trial where the CFO of a publicly traded company is accused of embezzling $2.7 million. Which of the following would be considered facts at issue? A. B. C. D.

16.

Illustrative (or summative) Probative in value Unbiased Reliable

(82) The chain of custody protects against the _____________ of evidence as a result of investigators losing control of it. A. B. C. D.

18.

A Panama Papers leak showing the existence of an offshore shell company account with the CFO listed as the beneficial owner. Whether or not the CFO stole the money. An email from the CFO directing the Head of Accounting to disregard the absence of invoices for purchases of “business consulting services” authorized by the CFO. Documentation of special purpose entities created and controlled by the CFO that do not appear on the company’s balance sheet.

(82) Documentary evidence is at the heart of most fraud and forensic accounting investigations. Five considerations must be given to any piece of documentary evidence: The document must not have been forged, original documents are preferred, the document must not be hearsay or objectionable, the document needs to be authenticated, and the document must be _____________. A. B. C. D.

17.

Validity Competence Probative value Non-speculative

Shredding Possible corruption Leaking Unauthorized distribution

(82) Evidence is anything legally presented at trial to ___________ and convince a jury. A. B. C. D.

Link the facts at issue into a story Explain or demonstrate the facts (such as a PowerPoint presentation) Prove a contention Secure a guilty verdict

4 of 7

L. 34.

The essence of criminal and civil litigation is ______________—both sides get the opportunity to present the facts and circumstances from their opposing perspectives. M. N. O. P.

35.

Credibility; preparation The law; accounting Facts; opinions Attorneys (on both sides); witnesses (on both sides)

The first goal of the opposing attorney during cross-examination is to ____________________. E. F. G. H.

39.

A cruel game in which the fraud examiner is the court jester A fait accompli where the verdict is concerned An act of presentation and choreography An anachronistic ritual to establishing liability

Direct examination is the intersection of ____________ and ____________. A. B. C. D.

38.

The preliminary phase A mediated arbitration A deposition An ex parte injunction

Essentially, based on discovery in civil litigation (including depositions), each side knows the other side’s theory of the case and what the witnesses are expected to say. As such, the civil trial becomes, to some extent, ________________________. U. V. W. X.

37.

Fairness and balance Predicated on a presumption of goodwill until proven otherwise Managed mediation Controlled confrontation

_______________ is a pretrial process during which the parties to a civil litigation are allowed to examine the other side’s fact and expert witnesses. Q. R. S. T.

36.

Credibility

Discover what the expert knows and to assess their level of preparation Prove that there is some other reasonable explanation for the missing money Present an alternative narrative (i.e., a different interpretation) of the facts Challenge the expert’s credibility, if possible

The Primrose Path, The Nodding Chicken, Ask Until You Admit, You’ve Got to Be Kidding, This Means Nothing, and You Really Didn’t Mean to Say, are all examples of what?

8 of 10

A. B. C. D. 40.

A good system of internal controls has four separate areas of responsibility: one person is responsible for safeguarding the assets; another person has authority over transactions associated with the asset; a third person is responsible for recording transactions for assets; and a fourth person should _____________________. E. F. G. H.

41.

How most fraud occurs within that particular industry The players involved The control environment Red flags in order to establish the scope

At a minimum, corporate governance should address three issues: (1) creating and maintaining a culture of honesty and high ethics, (2) evaluating fraud risks and implementing programs and controls to mitigate them, and (3) _____________________. M. N. O. P.

43.

Prepare the financial statements Orchestrate a system of audits, physical inventories, and reconciliations Perform criminal background checks on people with access to the assets Investigate allegations of fraud, waste, and abuse

At the inception of an examination, the fraud examiner or forensic accountant needs to develop an understanding of: I. J. K. L.

42.

Techniques used in cross-examinations Scenarios in which the defendant is extremely vulnerable Diversions directed at the jury which are employed by attorneys when the facts are not in their client’s favor Chapters in a book titled, The Expert Testimony Game: How to Win Big While Maintaining Your Credibility

Keeping sound meeting minutes that reflect that the board reasonably performed its duty of care Engaging in strategic planning as a means of ensuring appropriate company goals Hiring a capable CEO and maintaining robust oversight of that individual Developing an appropriate antifraud oversight process

The following is a five-step approach to fraud prevention, deterrence, and detection: (1) know the exposures, (2) translate exposure into likely symptoms, (3) always be on the lookout for these symptoms, (4) build supervisory, review and audit programs to look for symptoms, and (5) ________________________________________. Q. R. S. T.

Maintain defensible documentation on all investigations Establish a proper tone at the top in both words and actions Follow up on these issues to their logical, evidence-based conclusions Train employees to be able to identify and report these issues

9 of 10